Background information

The Széchenyi Card Programme was launched in 2002 by the National Association of Entrepreneurs and Employers (Vállalkozók és Munkáltatók Országos Szövetsége, VOSZ) and the Hungarian Chamber of Commerce and Industry (Magyar Kereskedelmi és Iparkamara, MKIK). The purpose of this scheme is to boost the liquidity of Hungarian micro, small and medium-sized enterprises.

It was originally designed for five years, but later on, new credit schemes were introduced, and still are available in 2020. The original Liquidity Loan Facility construction was supplemented by other loan schemes: the Current Assets and Investment Loan Structures in 2010, and two new constructions to assist in EU tenders – Széchenyi Intermediate Supplementary Loans and Széchenyi Aid Advancing Credit – became available to businesses from the spring of 2012. In 2011, the programme was expanded to the agricultural sector: the Agrár Széchenyi Card was introduced

Content of measure

A Széchenyi Card may be requested by any micro, small or medium-sized enterprise that:

• has at least one complete and closed year; if the requested loan is higher than HUF 25 million (about €72,000), then at least two closed years;
• has no overdue public debts;
• complies with the requirements of the business regulations on the Széchenyi Card Programme.

The Széchenyi Card Programme was launched in 2002 by the National Association of Entrepreneurs and Employers (Vállalkozók és Munkáltatók Országos Szövetsége, VOSZ) and the Hungarian Chamber of Commerce and Industry (Magyar Kereskedelmi és Iparkamara, MKIK). These two employers’ organisations VOSZ and MKIK of employers jointly founded the KAVOSZ Zrt. as a private limited company owned by the founders. This company carries out the management tasks concerning the Széchenyi Card Programme, coordinates its operation, prequalifies creditworthiness of loan applicants and transmits these data to credit institutions.

The purpose of this scheme is to boost the liquidity of Hungarian micro, small and medium-sized enterprises. It was originally designed for five years, but later on, new credit schemes were introduced, and still are available in 2020. The original Liquidity Loan Facility construction was supplemented by other loan schemes: the Current Assets and Investment Loan Structures in 2010, and two new constructions to assist in EU tenders – Széchenyi Intermediate Supplementary Loans and Széchenyi Aid Advancing Credit – became available to businesses from the spring of 2012. In 2011, the programme was expanded to the agricultural sector: the Agrár Széchenyi Card was introduced.

The credit limit has also been increased: while the limit was HUF 1 million in 2002 (about €4,100 at the average exchange rate of that year), it was raised to HUF 100 million in 2017 (about €320,000). The rate and the proportion of the interest subsidy provided by the government has also changed several times over the last 15 years.The number of banks participating in the loan schemes of the Széchenyi Card Programme has increased during the period, from three in 2002 to nine in 2018 (but not all of these banks are active in crediting in the framework of the Széchenyi Programme).

In the context of the COVID-19 pandemic, the Hungarian government has introduced a suspension on loan repayments, capital repayment and any related fees until at least 31 December 2020. To receive the freeze the commercial loan or financial lease should be under a loan contract signed before 18 March 2020. The length of the loan will be extended with the period of the freeze. These measures are intended to keep lending activities afloat despite the crisis.

The Banking Association stated that the deferred loan payments would amount to about HUF 450 billion (about €1.3 bilion) in the 9-months period. After the freeze period the loan is extended to the period necessary to keep loan payments to their pre-COVID levels, and banks cannot charge compound interest either. These rules apply to any fees related to the loan, too. Based on central bank data, the measure could concern 33,000 companies. This loan payments moratorium (capital and interest) is valid for Széchenyi loans and credit lines, too. Furthermore, from 15 May 2020, four new constructions have been released, specifically to combat the crisis caused by the coronavirus. (These credit facilities have no deadline but are open, for the time being.)

1. the Széchenyi Workplace Retention Loan launched to support the preservation of jobs. This type of loan can be used to support labour costs.
2. the free-use Széchenyi Card Overdraft PLUS, which can be used in combination with the Széchenyi Workplace Retention Loan;
3. the 3-year, free-use Széchenyi Liquidity Loan is suitable for the purchase of any current assets and the financing of other services used.
4. the Széchenyi Investment Loan PLUS can help to restore normal business operations in the period following the end of the emergency.

The last two types of loan differ from other credit facilities of the Széchenyi Card that they can be used much less limited than other types of loans. After the outbreak of the COVID-19 crisis, the credit limit of the Agrár Széchenyi card for farming was raised from HUF 100 million to HUF 200 million (approximately €570,000). This increased amount can be claimed until the end of 2020.

Use of measure

The Széchenyi Card Programme schemes do not represent a significant proportion in total SME lending. Their weight in total SME loans is about 4.5-5%. Within this, the programme mainly provides access to credit to individual entrepreneurs and micro enterprises (about 7-8% of total credit in this segment), but it is less important for small businesses (about 6%), while in the case of medium-sized companies, the ratio of loans granted under the programme to the total lending portfolio of medium-sized companies does not reach 1%.

With regard to the temporary freeze on loan repayment for companies due to the pandemic, in a preliminary statement, the central bank estimated that 80% of clients would opt for the payment suspension, but later this estimation was lowered to about 50%. In an online survey by bank360.hu it appeared that only about 30% of clients choose to extend their loans in this way, most of whom were individuals, so uptake by businesses seems even lower so far. The measure could have an indirect effect on employment, as companies with long-term loans employ about 1.25 million people. Sectors that are indebted to a higher rate include: agriculture, commerce, accommodation and catering, and processing.

The Széchenyi Card Programme offers a loan possibility for individual entrepreneurs and micro businesses for whom it would be difficult to obtain loans from banks otherwise. The prequalification of businesses by KAVOSZ Zrt. helps the banks in the lending procedure to this segment. Furthermore, it strengthens the ties between entrepreneurs, entrepreneurial associations and the banking sector.

The Széchenyi Card Programme has played a significant role at the time of its introduction (2002), when access to loans was very limited for small companies. But today, amid decreasing interest rates and higher willingness by banks to lend to SMEs, the Széchenyi Card credit schemes have lost some of their competitiveness. Although the lending conditions of commercial banks were tightened as a result of the COVID-19 crisis, the National Bank opened new and very cheap credit facilities for the banks in order to lend to firms.

The Liquidity Loan Facility continues to be the most popular credit scheme, but companies are complaining because of its short duration (only 2 years) that makes long-term financial planning difficult for firms. Although this loan facility can be prolonged, this is not guaranteed. Over the last 18 years there were about 300,000 loan agreements signed in the framework of the Széchenyi Card Programme, linked to about 75,000-80,000 customers.

Target groups

Workers	Businesses	Citizens
Does not apply to workers	SMEs	Does not apply to citizens

Actors and funding

Actors	Funding
National government Employers' organisations	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Unknown	Agreed (outcome) incl. social partner initiative
Form	Not applicable	Direct consultation outside a formal body

Social partners' role in the implementation, monitoring and assessment phase:

• Only employers' organisations
• Main level of involvement: Unknown

Involvement

The National Association of Entrepreneurs and Employers (Vállakozók és Munkáltatók Országos Szövetsége, VOSZ) and the Hungarian Chamber of Commerce and Industry (Magyar Kereskedelmi és Iparkamara, MKIK) were involved in setting up the programme

Views and reactions

Unknown

Sources

• 23 March 2020: How does the loan payment moratorium affect each sector (piacesprofit.hu)
• 24 March 2020:  Details of the loan payment moratorium (www.portfolio.hu)
• 30 April 2020: Stat. Instrument 1194/2020 on the Széchenyi Card Program loan schemes (njt.hu)
• 15 May 2020: New Széchenyi Card Program construction (www.kavosz.hu)
• 26 October 2022: Kopint-Tárki's own estimate based on the data of KAVOSZ Zrt and the Hungarian National Bank statistics (www.kopint-tarki.hu)
• 26 October 2022: KAVOSZ homepage (www.kavosz.hu)